Y Combinator now wants startups that really want to change the world. Here’s why that matters

Y Combinator turned some heads last year when it began accepting nonprofit startups into its San Francisco incubator program. Amid the Dropboxes and Hipmunks, YC startups are suddenly developing an HIV/AIDS vaccine and crowdfunding healthcare.

The incubator is going one step beyond that with its next class. A request for startups went out today that outlines 22 new areas YC is interested in, although the majority of the startups it accepts will continue to be internet- and mobile-centric. They cover everything from artificial intelligence to robotics to healthcare, categories YC describes as “breakthrough technologies.”

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They are things you would not expect to find a startup doing. That’s because a decade ago they probably would have been impossible for a startup. A company from YC’s most recent class is building a fusion reactor, something once contained to well-funded government labs. Now even clever high school students can fuse nuclei in their garage.

There is another word for them: exponential technologies. These are fields that have the potential to evolve very quickly and dramatically change the world. The best example is computing, which for decades now has rapidly increased in power while dropping in cost. Data processing that once took a team of people to complete can now be done on the phone sitting in your pocket.

Cambrian Genomics wants to make it 10,000 times cheaper to synthesize DNA with a laser-based system. Photo courtesy of Cambrian Genomics.

Boosting by the immense amount of computing power now available to everyone, those abilities are expanding to other fields–from robotics to nanotechnology to synthetic biology.

“There are plenty of people that will make lots of money making small apps to do nonsensical things, whereas that same capability could be used and deployed to target curing cancer or solving other different types of problems that could be much more meaningful on the planet using basically the same types of skills,” angel investor Rob Nail said to me earlier this year. “It’s just a mindset to strive for higher order problems.”

YC isn’t shifting its entire class to be made up of the breakthrough technologies it is recruiting. But it’s a small gesture that Silicon Valley as a whole is recognizing its potential.

A case study: Singularity University

Nail is the CEO of Singularity University, an unaccredited education center in Mountain View, Calif. It’s one part mad scientist lab and one part overpriced corporate cult. It brings in several classes of executives and recent graduates a year and teaches them about the technologies impacting the world’s grand challenges. Recent graduates work on a project idea, many of which become real. Some enter Singularity’s startup accelerator, SU Labs.

That mixture has spawned and supported some of the most interesting startups in Silicon Valley. Take SU Labs graduate Cambrian Genomics, which 3D prints DNA with equipment you might find in your living room. Made in Space, which formed out of the recent graduate program, is sending its first 3D printer to the International Space Station this month.

Made in Space CTO Jason Dunn and CEO Aaron Kemmer show off a 3D printed CubeSat, plus other parts that could be made aboard the ISS. Photo by Signe Brewster.

The best choices for Singularity startups have both long- and short-term applications, managing director of new venture development Sandy Miller explained to me during one of the executive sessions in February. Modern Meadow, for example, wants to grow meat that is as tasty as the stuff that comes off an actual cow. But science isn’t quite there yet. In the meantime, Modern Meadow is commercializing lab-grown leather.

“Be ahead, but not so far ahead you can’t even see the dot in the distance,” Miller said.

So why don’t more people invest in exponential technologies?

Just because a technology could change the world doesn’t mean it will be showered with VC money. Take SpaceX.

“The first three launches that we conducted failed,” Musk said during a Google Hangout last year. “We were just too stupid to know how to make a rocket go to orbit. I had budgeted. I thought, ‘OK, we can afford three launches.’ Then the third one failed and we were just barely able to scrape together enough money for a fourth launch. If it had not succeeded SpaceX would not be around today.”

Sitting in a room and building a mobile phone app is a very, very different undertaking from building a rocket ship. Exponential technologies tend to involve hardware, whether that means building a robot or creating a machine to manipulate tiny molecules. You can have a lot of smart people on a team and fail because it takes so much money to build a hardware company. It also requires time–sometimes a decade or more. And it’s possible for something to just be too difficult to build.

Elon Musk and the new Dragon V2, which will soon carry people to the International Space Station.

But when startups get over that hump, it can really pay off. SpaceX has raised $245.5 million to date because its potential is so clear. Sure, it’s already ferrying cargo back and forth between the ISS for NASA and releasing satellites into orbit. But its transformative contribution to the world will be reusable rockets–an invention that will drop the cost of spaceflight dramatically.

Silicon Valley, which draws its name from the exponential technology we owe the modern world to, is getting better at recognizing and supporting these startups. Big corporations and small startup incubators alike are eagerly investing in robotics. Y Combinator recognizes funding startups touching the grand challenges is more than a philanthropic gesture.